‘Ad money is pocket money’: Media companies get more creative with short-form monetization

Media companies have always needed a diverse revenue mix. Lately, U.K. media companies have been building out a balanced revenue diet in short-form content through merchandise, gifting and content windowing, as traditional sources, like broadcaster production fees, get squeezed.

For short-form content, less than the 10-minute mark, the economics are tight: Budgets are small, often between £1,000 ($1,277) and £2,000 ($2,554) a minute, but tough to monetize through ads. In the U.K., platforms like Facebook and Snapchat have opened up ways to monetize non-exclusive short-form content in recent months, giving content owners another revenue stream.

“For our original short-form, we’ve had to find different ways of spreading risk and ensuring maximum return on investment,” said Sam Barcroft, founder and CEO of programmer Barcroft Media. “Forward-thinking companies have to have multiple revenue streams.”

Ideally, short-form content can be used as an incubator for testing out concepts that will go on to be made into longer-form shows and sold to TV with ready-made audiences, opening up new revenue sources through global distribution. Netflix commissioned interior design show “Amazing Interiors” after seeing the success of Barcroft’s “Making Mad” series.

Barcroft has five other revenue sources like branded content, windowing deals with broadcasters like the BBC, and ad revenue from platforms like Facebook and Snapchat. For this, Barcroft benefits from a lot of scale, and since February, revenue from platforms has grown fivefold. And there’s headroom for growth, data from WARC predicts global advertising video on demand spend is expected to double by 2023, reaching $46.6 billion (£36.5 billion), up from $23.8 billion (£18.6 billion) currently.

“Non-exclusive distribution partnerships are a much more sustainable and mutually beneficial commercial model for publisher and platforms,” he added. Naturally, decent returns here rely on having a ton of scale and watch time.

“The way we look at it, ad money is pocket money, everything else is real money,” said Peter Cowley, CEO of content production studio Spirit Media. “Compared to TV, on YouTube and Facebook there’s unlimited everything. You need scarcity to get the value out.”

In the last few weeks, one of Spirit’s YouTube channels “The Lion Whisperer” which has 800,000 subscribers, joined YouTube’s membership scheme where viewers have the choice of paying £4.99 ($6.37) a month for perks, like loyalty badges, exclusive videos and member’s only posts. According to Cowley, just a few hundred have signed up but this revenue nearly matches the ad revenue the channel gets. As a general rule, 1 million YouTube views generates about $1,000 and “The Lion Whisperer” get a few hundred thousand views per video.

“Tradition publishers, broadcasters and producers always dealt in mass. A lot haven’t got their head around that, in digital, it’s deep niches where you can build communities, you have got to have something of interest,” said Cowley. “Only recently have revenue streams been big enough to make them into businesses.”

Of course, there’s little difference between this and building brands off digital platform. “Like all things where you build a brand you look at the other revenue streams you can build off the back of it,” he added.

As the industry matures, the amount of content grows and platform algorithms make it tougher to build big audiences, scaling ad revenue gets harder.

Different models will mean that certain revenue streams will be much more economical. For production company The Connected Set, half of its output is short-form content, and around 25 percent of revenue comes from licensing the content it’s already made to global distributors. And this is growing, in the last few weeks, there’s been a lot more demand for short-form from international distributors, partly as different regions launch more SVOD platforms and need more content.

“The key thing we’re working on is building up the intellectual property,” said Jake Cassels, co-founder of The Connected Set, which has been building up merchandise lines from characters on its comedy animated YouTube channel, “Mashed,” which it runs in partnership with Channel 4.

“Production budgets from broadcasters will get tighter,” he said. “Broadcasters aren’t fully funding productions and are expecting production companies to get advances from distributors or plug revenue deficits. We have to be more inventive and creative with how are programs get made.”